Summary of Selected Financial Data
(Thousands of dollars except per share amounts) Years ended December 31,
2000 1999 1998 1997 1996
Net sales $1,583,696 $1,284,262 $1,294,492 $1,328,841 $ 971,903
Earnings (loss) from
continuing operations $ 8,872 $ (13,587)$ 31,427 $ 35,070 $ 5,203
Net earnings $ 98,909 $ 47 $ 50,938 $ 29,079 $ 5,388
Earnings (loss) per
common share from
continuing operations $ 5.96 $ (9.13)$ 21.12 $ 23.58 $ 3.50
Earnings per common share$ 66.49 $ 0.03 $ 34.24 $ 19.55 $ 3.62
Total assets $1,312,848 $1,277,791 $1,215,897 $1,119,327 $1,002,892
Long-term debt,less
current maturities $ 312,418 $ 318,017 $ 313,324 $ 290,521 $ 281,574
Stockholders' equity $ 540,685 $ 443,168 $ 444,728 $ 395,368 $ 367,782
Dividends per common
share $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
The Company completed the sale of its Poultry Division on January
3, 2000, recognizing an after-tax gain on disposal of
discontinued operations of $90,037,000 or $60.53 per common share
after a final adjustment in the fourth quarter of 2000. See Note
13 to the Consolidated Financial Statements for further
discussion.
In the fourth quarter of 2000, the Company's Pork Division
reclassified certain shipping and handling costs from a reduction
of revenue to cost of sales. Prior periods have been
reclassified to conform with the current presentation. See Note
1 to the Consolidated Financial Statements for further
discussion.
The Company changed its method of accounting for certain
inventories from FIFO to LIFO in 1999. The net effect of this
change in 1999 was to increase net earnings by $2,456,000 or
$1.65 per common share.
In December 1998, the Company sold its baking and flour milling
operations in Puerto Rico, recognizing an after-tax gain of
$33,272,000 or $22.37 per common share. See Note 2 to the
Consolidated Financial Statements for further discussion.
The Company changed its method of accounting for spare parts and
supplies inventories in 1996. The cumulative effect of this
change at January 1, 1996, was to increase net earnings by
$3,006,000 or $2.02 per common share. In addition, the net
effect of this change in 1996, exclusive of the cumulative
effect, was to increase net earnings by $788,000 or $0.53 per
common share.
Quarterly Financial Data (unaudited)
(UNAUDITED)
(Thousands of dollars 1st 2nd 3rd 4th Total for
except per share amounts) Quarter Quarter Quarter Quarter the Year
2000
Net sales $ 369,807 393,917 372,260 447,712 $1,583,696
Operating income $ 18,035 12,228 10,903 6,899 $ 48,065
Earnings (loss) from
continuing operations $ 9,859 5,484 3,664 (10,135)$ 8,872
Net earnings (loss) $ 101,031 5,484 3,664 (11,270)$ 98,909
Earnings (loss) per
common share from
continuing operations $ 6.63 3.68 2.46 (6.81)$ 5.96
Earnings (loss) per
common share $ 67.92 3.68 2.46 (7.57)$ 66.49
Dividends per common share: $ 0.25 0.25 0.25 0.25 $ 1.00
Market price range per
common share:
High $ 200 206 204 182
Low $ 153 170 162 150
1999
Net sales $ 264,249 316,536 324,898 378,579 $1,284,262
Operating income $ 405 1,062 3,393 7,508 $ 12,368
Earnings (loss) from
continuing operations $ (4,432) (4,195) (3,117) (1,843)$ (13,587)
Net earnings (loss) $ (612) 2,158 2,152 (3,651)$ 47
Earnings (loss) per
common share from
continuing operations $ (2.98) (2.82) (2.09) (1.24)$ (9.13)
Earnings (loss) per
common share $ (0.41) 1.45 1.45 (2.46)$ 0.03
Dividends per common share $ 0.25 0.25 0.25 0.25 $ 1.00
Market price range per
common share:
High $ 457 340 320 262
Low $ 298 256 216 185 1/4
The Company completed the sale of its Poultry Division on January
3, 2000, recognizing an after-tax gain on disposal of
discontinued operations of $90,037,000 or $60.53 per common share
after a final adjustment to decrease the gain by $1,135,000 or
$0.76 per common share in the fourth quarter of 2000. See Note
13 to the Consolidated Financial Statements for further
discussion.
In the fourth quarter of 2000, the Company exchanged its
controlling interest in a Bulgarian wine company and $10,400,000
cash for a non-controlling interest in a larger Bulgarian wine
operation, realizing an after-tax loss on the exchange of
$3,648,000 or $2.45 per common share. See Note 2 to the
Consolidated Financial Statements for further discussion.
In the fourth quarter of 2000, the Company's Pork Division
reclassified certain shipping and handling costs from a reduction
of revenue to cost of sales. Prior periods have been
reclassified to conform with the current presentation. See Note
1 to the Consolidated Financial Statements for further
discussion.
Management's Discussion & Analysis
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
(Dollars in millions) 2000 1999 1998
Current ratio 1.92:1 1.44:1 1.64:1
Working capital $ 292.3 184.2 231.1
Cash from operating activities $ (0.5) (40.5) 59.5
Capital expenditures $ 116.9 67.7 26.9
Long-term debt, less current maturities $ 312.4 318.0 313.3
Cash provided by operating activities for 2000 increased $40.0
million compared to 1999. The increase was primarily related to
an increase in cash from net earnings from continuing operations,
partially offset by changes in components of working capital.
Changes in components of working capital, net of businesses
acquired and exchanged/disposed, are primarily related to the
timing of normal transactions for voyage settlements, trade
payables, accrued liabilities and receivables. Within the
Commodity Trading and Milling, and Power segments, higher sales
in the fourth quarter of 2000 compared to the fourth quarter of
1999 resulted in increased receivable balances at December 31,
2000. Within the Commodity Trading and Milling segment,
receivables and deferred revenues also increased at December 31,
2000 related to an increase in incomplete voyages compared to
December 31, 1999. Despite the increase in deferred revenue, the
change in current liabilities exclusive of debt resulted in a use
of cash during 2000 as the Company funded approximately $16.0
million for accruals established as a component of the
discontinued poultry operations sale in January 2000, primarily
offsetting the increase in deferred revenues. These accruals
related primarily to funding required for certain expansion
projects in accordance with the original sales agreement. See
Note 13 to the Consolidated Financial Statements for further
discussion of the discontinued poultry operations.
Cash provided by operating activities for 1999 decreased $100.0
million compared to 1998. The decrease is primarily related to
changes in certain components of working capital, which include
Tabacal for 1999 (see Sugar and Citrus segment discussion below),
and a decrease in net earnings from continuing operations.
Changes in components of working capital are primarily related to
the timing of normal transactions for voyage settlements, trade
payables and receivables. Within the Commodity Trading and
Milling segment there was a higher value of inventory in transit
at December 31, 1999 than at December 31, 1998 resulting in
increases in grain inventory and prepaid expense balances and a
partially offsetting increase in deferred revenue balances.
Current liabilities exclusive of debt increased only slightly
during 1999 as the Company paid $14.6 million in taxes related to
the 1998 gain from the sale of baking and flour milling
operations in Puerto Rico, primarily offsetting the increase in
deferred revenue balances.
Cash from investing activities for 2000 increased $178.3 million
compared to 1999. The increase is primarily related to proceeds
from the sale of discontinued poultry operations, partially
offset by acquisitions, investments in foreign affiliates and
capital expenditures. See Note 2 to the Consolidated Financial
Statements for further discussion of the Poultry Division sale,
the acquisition of the assets of a hog production operation, a
cargo terminal facility, and a flour and feed milling facility
and the exchange of a controlling interest in a Bulgarian wine
operation and cash for a non-controlling interest in a larger
Bulgarian wine operation. The Company invested $116.9 million in
property, plant and equipment during 2000 as described below.
The Company invested $26.4 million in the Pork segment during
2000 primarily for the expansion of hog production facilities,
including starting construction on a new feed mill, and for
improvements to the pork processing plant. The Company currently
anticipates investing $14.0 million during 2001 for continued
expansion of hog production facilities, completion of the new
feed mill and general upgrades to the pork processing plant. The
Company previously announced plans to commence construction on a
second processing plant in 2001 including the selection of a
location in northeast Kansas. However, permitting and site
issues now make plant construction in 2001 uncertain.
The Company invested $17.1 million in the Marine segment during
2000 primarily to purchase a previously chartered vessel and for
container and other material handling equipment. The Company
currently anticipates investing $14.5 million during 2001
primarily to purchase another previously chartered vessel in
February 2001 and for additional equipment.
The Company invested $14.4 million in the Sugar and Citrus
segment primarily for improvements to existing facilities and
sugarcane fields. During 2001, the Company currently plans to
spend $8.0 million for additional improvements.
The Company invested $52.1 million in the Power segment primarily
for the construction of a 71.2 megawatt barge-mounted power plant
located in the Dominican Republic. No material capital
expenditures are expected in this division during 2001.
Capital expenditures in all other segments during 2000 totaled
$6.9 million in general modernization and efficiency upgrades of
plant and equipment.
Management anticipates the planned capital expenditures for 2001
will be financed by internally generated cash.
During the first quarter of 2000, the Company purchased a
minority interest in a flour and feed mill operation in Kenya for
$7.5 million. This transaction was accounted for using the
equity method.
During the fourth quarter of 2000, the Company exchanged its
controlling interest in a Bulgarian wine company and
$10.4 million cash for a non-controlling interest in a larger
Bulgarian wine operation, realizing a $5.6 million pre-tax loss
in the exchange. This investment will be accounted for using the
equity method.
The Company has a non-controlling interest in a joint venture in
Maine primarily engaged in the production and processing of
salmon and other seafood products. In December 2000, this joint
venture signed a non-binding letter of intent to merge with Fjord
Seafood ASA (Fjord), a large salmon operation in Norway. Pending
the resolution of certain contract terms, the merger is expected
to close in the second quarter of 2001, resulting in the Company
holding a less than 10% ownership interest in Fjord. Based on
current fair market value of Fjord, the Company anticipates
recognizing a gain upon completion of this transaction.
Cash from investing activities for 1999 increased $44.7 million
compared to 1998. The increase is primarily related to a net
sale and maturity of investments in 1999 compared to a net
purchase of investments in 1998. The net purchase of investments
in 1998 related to the $72.4 million in cash received from the
sale of baking and flour milling operations. During 1998,
investments in and advances to foreign affiliates included $45.8
million to Tabacal. As further discussed in Note 5 to the
Consolidated Financial Statements, Tabacal has been consolidated
since December 31, 1998. As such, funds invested in Tabacal
during 1999 are reflected within the appropriate components of
the cash flow statements, including capital expenditures.
During 1999, the Company invested $67.7 million in the property,
plant and equipment of continuing operations. Capital
expenditures in the Pork segment totaled $22.1 million primarily
for the expansion of existing hog production facilities and for
improvements to the pork processing plant. Capital expenditures
in the Marine segment totaled $20.0 million primarily for the
purchase of two vessels previously chartered and for general
replacement and upgrades of property and equipment. Capital
expenditures in the Commodity Trading and Milling segment totaled
$4.8 million, including $2.0 million to purchase a previously
chartered bulk carrier vessel from a wholly-owned subsidiary of
Seaboard Flour Corporation, the owner of 75.3% of the Company's
outstanding common stock. Capital expenditures in the Sugar and
Citrus segment totaled $15.0 million primarily for improvements
to existing operations and expansion of sugarcane fields.
Capital expenditures in all other segments totaled $5.8 million
in general modernization and efficiency upgrades of plant and
equipment.
During 1999, the Company invested $2.8 million to acquire
additional shares of a Bulgarian winery originally acquired in
1998. During 1999, the Company also invested $1.7 million for a
minority interest in a flour mill in Angola which is being
accounted for using the equity method.
Cash from financing activities in 2000 decreased $232.9 million
compared to 1999 primarily from the repayment of notes payable in
2000 compared to net borrowings in 1999. During 2000, the
Company repaid approximately $165.8 million in notes payable,
industrial development revenue bonds and other debt primarily
with proceeds from the Poultry Division sale. As a result of
these repayments, approximately $3.8 million in unamortized
proceeds from prior terminations of interest rate agreements
related to these notes were recognized as miscellaneous income.
During 2000, the Company borrowed proceeds of $5.2 under an
industrial development revenue bond. These funds were acquired
for construction of a Pork Division feed mill. As of December
31, 2000, $4.1 million of the proceeds remains in a bond
construction fund to be used for completion of the mill in 2001.
During 2000, the Company's one-year revolving credit facilities
totaling $153.3 million were reduced to $141.0 million and
extended for an additional year and the short-term uncommitted
credit lines totaling $145.0 million were reduced to $119.5
million. As of December 31, 2000, the Company had $31.2 million
outstanding under one-year revolving credit facilities and $49.3
million outstanding under short-term uncommitted credit lines.
Subsequent to year-end, the Company's one-year revolving credit
facilities totaling $141.0 million maturing in the first quarter
of 2001 were extended for an additional year and short-term
uncommitted credit lines totaling $119.5 million were reduced to
$109.5 million.
Cash from financing activities in 1999 increased $90.6 million
compared to 1998, primarily related to proceeds from short-term
borrowings and, to a lesser extent, terminating interest rate
swap agreements. During 1999, the Company terminated interest
rate exchange agreements effectively fixing the interest rate on
$200 million of variable rate debt for proceeds totaling $6.0
million.
During 1999, the Company prepaid at a discount certain long-term
debt obligations assumed with the purchase of the Bulgarian
winery in October 1998 and adjusted certain balances related to
the acquisition. During 1999, the Company also prepaid at a
discount other higher cost, U.S. dollar denominated foreign
subsidiary debt obligations. These prepayments reduced total
long-term debt obligations by $13.5 million. Changes to the
preliminary purchase price allocations and other non-cash
adjustments related to these transactions resulted in immaterial
adjustments to several balance sheet line items, primarily
reductions to minority interest, net property, plant and
equipment, and long-term debt.
Cash used in discontinued poultry operations in 1999 primarily
represents capital expenditures ($52.9 million including
expansion projects) in excess of net operating cash flows. The
decrease in cash from discontinued operations in 1999 compared to
1998 is primarily a result of lower earnings and higher capital
expenditures.
Management intends to continue seeking opportunities for
expansion in the industries in which it operates and believes
that the Company's liquidity, capital resources and borrowing
capabilities will be adequate for its current and intended
operations.
Results of Operations
Net sales totaled $1,583.7 million for the year ended December
31, 2000, compared to sales of $1,284.3 million for the year
ended December 31, 1999. Operating income of $48.1 million for
2000 increased $35.7 million compared to 1999.
Net sales totaled $1,284.3 million for the year ended December
31, 1999, compared to sales of $1,294.5 million for the year
ended December 31, 1998. Operating income of $12.4 million for
1999 decreased $17.4 million compared to 1998.
Pork Segment
(Dollars in millions) 2000 1999 1998
Net sales $ 724.7 600.1 529.5
Operating income $ 63.4 37.7 (1.1)
Net sales increased $124.6 million to $724.7 million in 2000
compared to 1999. This increase is a result of higher pork
prices and, to a lesser extent, an increase in sales volume. An
excess supply of hogs had depressed pork prices through the first
half of 1999. The excess has since declined resulting in
improved prices. Sales volume increased as the plant ran
extended shifts to take advantage of positive margins.
Operating income for the Pork segment increased $25.7 million to
$63.4 million in 2000 compared to 1999. This increase is
primarily a result of improved sales prices and volumes as
discussed above. As a result of recent acquisitions, the Company
also benefited from the increased number of lower-cost, Company-
raised hogs processed. While the cost of third-party hogs
increased, third-party hogs as a percent of total hogs processed
decreased. While management is unable to predict future market
prices, it currently anticipates that overall market conditions
in 2001 will continue to provide profitable results, although
lower than those achieved in 2000.
Net sales increased $70.6 million to $600.1 million in 1999
compared to 1998. This increase is primarily the result of an
increase in sales volume and, to a lesser extent, improved prices
for finished pork products. The increase in sales volume is the
result of the hog processing plant operating at full capacity on
a double-shift basis during 1999. The plant employed a second
shift during the first half of 1998, but did not achieve full
double-shift capacity until the third quarter of 1998. An excess
supply of live hogs depressed pork prices during 1998 and the
first half of 1999. During the second half of 1999, the excess
declined, resulting in improved prices for the year.
Operating income increased $38.8 million to $37.7 million in 1999
compared to 1998. This increase is primarily a result of
improved sales prices and, to a lesser extent, a decrease in the
cost of Company-raised hogs. The decrease in the cost of Company-
raised hogs is primarily the result of lower grain prices. The
Company also continued to benefit from low prices for third-party
hogs purchased during 1999. However, an increase in this cost
during the fourth quarter of 1999 compared to extremely low
prices for third-party hogs during the fourth quarter of 1998
resulted in a slight increase in this cost for the year. In
addition, effective January 1, 1999, the Company changed its
method of accounting for certain pork inventories from FIFO to
LIFO, increasing operating income in 1999 by $4.0 million.
Marine Segment
(Dollars in millions) 2000 1999 1998
Net sales $ 364.9 307.7 310.9
Operating income $ 14.5 (1.9) 17.4
Net sales for the Marine segment increased $57.2 million to
$364.9 million in 2000 compared to 1999. This increase resulted
primarily from significant increases in volumes, while cargo
rates increased slightly. Management believes weak economic
conditions in certain South American markets continued to depress
rates for the first half of 2000; however, volumes increased and
cargo rates improved in the second half of the year. Operating
income from the Marine segment increased $16.4 million to $14.5
million in 2000 compared to 1999, primarily as a result of the
increased volumes discussed above partially offset by higher fuel
costs. Management expects operating income will remain positive
during 2001, anticipating further volume increases and continued
rate improvement in certain South American markets, but with
uncertainty concerning fuel costs.
Net sales decreased $3.2 million to $307.7 million in 1999
compared to 1998. Cargo volumes and applicable cargo rates
decreased in the first half of 1999 compared to 1998 primarily as
a result of weak economic conditions in certain South American
markets served by the Company. During the second half of 1999,
overall cargo volume increased from 1998 due to improvements in
certain markets, but the effect on net sales was largely offset
as rates remained depressed. Operating income from the Marine
segment decreased $19.3 million to $(1.9) million in 1999
compared to 1998, primarily as a result of lower cargo rates
discussed above.
Commodity Trading and Milling Segment
(Dollars in millions) 2000 1999 1998
Net sales $ 359.0 259.5 306.4
Operating income $ (3.5) 2.6 10.5
Net sales increased $99.5 million to $359.0 million in 2000
compared to 1999, primarily as a result of increased wheat sales
to third parties in certain markets and to certain foreign
affiliates. Operating income decreased $6.1 million to $(3.5)
million in 2000 compared to 1999, primarily as result of losses
from the Company's milling operations in Zambia and decreased
income from operating certain mills in foreign countries. Due to
the nature of this segment's operations and its exposure to
foreign political situations, management is currently unable to
predict future sales and operating results.
Net sales decreased $46.9 million to $259.5 million in 1999
compared to 1998, primarily as a result of lower wheat sales to
certain foreign affiliates, lower soybean sales to third parties
and, to a lesser extent, a decrease in commodity prices sold in
foreign markets. Wheat sales to certain foreign affiliates
decreased as political unrest resulted in economic problems that
reduced consumer purchasing power and thus lowered milling
volumes. Such decreases were partially offset by the addition of
sales during 1999 from the Company's milling operations in Zambia
acquired in late 1998.
Operating income decreased $7.9 million to $2.6 million in 1999
compared to 1998, primarily as a result of the decrease in wheat
sales and margins to certain foreign affiliates as discussed
above and operating losses from the Company's milling operations
in Zambia acquired in late 1998.
The Company has evaluated the recoverability of the long-lived
assets of its Zambian milling operations due to its recent
operating losses. Total long-lived assets at December 31, 2000
are $6.8 million. Currently, the Company believes the value of
those assets is recoverable. However, continued operating losses
from this business could result in the carrying values not being
recoverable, which could result in a material charge to earnings
for the impairment of these assets.
Sugar and Citrus Segment
(Dollars in millions) 2000 1999 1998
Net sales $ 60.1 46.9 -
Operating income $ (7.6) (15.9) -
Net sales increased $13.2 million to $60.1 million compared to
1999, primarily a result of higher sales volumes, partially
offset by slightly lower prices. Operating income increased $8.3
million to $(7.6) million compared to 1999, primarily as a result
of improved margins and lower operating costs. During the second
quarter of 1999, severance charges of $3.0 million were incurred
related to certain employee layoffs. Although management is not
able to predict sugar prices for 2001, it is anticipated that
operating results may improve based on recent sugar price trends.
As discussed in Note 5 to the Consolidated Financial Statements,
comparative 1998 operating results for the Sugar and Citrus
segment are not presented as this business was accounted for on
the equity method in 1998. However, lower sugar prices offset
increased volumes resulting in lower revenues and higher losses
in 1999 compared to 1998. Lower sugar prices were primarily the
result of an excess supply of sugar in Argentina and, to a lesser
extent, lower sugar prices on the world market. As discussed
above, during the second quarter of 1999, severance charges of
$3.0 million were incurred related to certain employee layoffs.
During 1998, the loss from foreign affiliates attributable to
this business was $15.8 million.
As a result of past operating losses, the Company annually
evaluates the recoverability of the segment's long-lived assets
and believes the value of those assets is presently recoverable.
Further long-term decline in sugar prices could result in the
carrying values not being recoverable, which would result in a
material charge to earnings for the impairment of these assets.
Power Segment
(Dollars in millions) 2000 1999 1998
Net sales $ 35.8 23.0 26.2
Operating income $ 6.0 7.9 8.8
Net sales increased $12.8 million to $35.8 million in 2000
compared to 1999, primarily as a result of the new power barge
beginning operation in October 2000 and, to a lesser extent, a
fuel adjustment clause allowing the Company to pass on higher
fuel costs. Operating income decreased $1.9 million to $6.0
million in 2000 compared to 1999, primarily as a result of the
recovery of previously written-off receivables in 1999 and, to a
lesser extent, certain start up expenses associated with the new
power barge.
Net sales decreased $3.2 million to $23.0 million in 1999
compared to 1998. Operating income decreased $0.9 million to
$7.9 million in 1999 compared to 1998. These decreases are
primarily a result of the termination of operations in October
1998 of a customer that was the only user of service from a
generating station owned by the Company.
Wine Segment
(Dollars in millions) 2000 1999 1998
Net sales $ 6.8 12.9 -
Operating income $ (9.2) (5.9) -
As discussed in Note 2 to the Consolidated Financial Statements,
Seaboard's consolidated wine segment and a cash contribution were
exchanged for a non-controlling interest in a larger Bulgarian
wine operation on December 29, 2000. As the Wine segment was
previously consolidated on a three-month lag, in order to reflect
the operating results of the Wine segment through the date of the
exchange, the Wine segment's results for 2000 include 15 months
of operations. The effect of including the additional three
month activity in fiscal 2000 increased revenues by $1.2 million
and decreased operating income by $1.9 million.
Despite the inclusion of the additional three months' revenue for
2000, net sales decreased $6.1 million to $6.8 million in 2000
compared to 1999, primarily as a result of lower sales volumes in
certain European markets. Operating income decreased $3.3
million to $(9.2) million in 2000 compared to 1999, primarily
resulting from lower sales and the inclusion of additional losses
through the date of exchange as discussed above, the cost of
acquiring wine materials on the open market to supplement local
grape shortages, and increasing reserves for uncollectible
receivables and advances for raw materials.
As discussed in Note 2 to the Consolidated Financial Statements,
the Company originally acquired its wine business in October
1998. No results are presented for 1998 as the winery was
reported on a three-month lag. Operating losses in 1999 are
primarily a result of acquiring more expensive wine materials on
the open market to supplement local grape shortages and reserving
for uncollectible advances for raw materials.
All Other Segments
(Dollars in millions) 2000 1999 1998
Net sales $ 32.3 34.3 121.5
Operating income $ (11.5) (4.7) (0.4)
Operating income decreased $6.8 million to $(11.5) million in
2000 compared to 1999, primarily as a result of low yields and
quality which decreased margins on seasonal produce sales,
primarily melons and, to a lesser extent, losses related to the
pickle and pepper operations in Honduras. In addition, at the
end of the melon growing season in June 2000, management
increased reserves for certain melon grower advances.
During the third quarter of 2000, the Company discontinued the
business of marketing fruits and vegetables grown through joint
ventures or independent growers by selling certain assets of its
Produce Division (see Note 2 to the Consolidated Financial
Statements). As a result of the sale and other operational and
business changes in the Produce Division, management anticipates
improved operating results for this division in 2001.
Net sales from other operations decreased $87.2 million to $34.3
million in 1999 compared to 1998, while operating income
decreased $4.3 million to $(4.7) million in 1999 compared to
1998. These decreases are primarily a result of the sale of the
Puerto Rican baking operations in December 1998 as discussed in
Note 2 to the Consolidated Financial Statements.
Selling, General and Administrative Expenses
Selling, general and administrative (SG&A) expenses totaled
$129.2 million, $107.8 million and $119.3 million for the years
ended December 31, 2000, 1999 and 1998, respectively. The 2000
increase is primarily a result of costs associated with acquired
operations in the Pork segment, additional three month expenses
in the Wine segment, increases in reserves for certain
uncollectible grower advances in the Produce Division,
uncollectible advances for raw materials in the Wine segment and
increases in the Power segment associated with the recovery of
receivables written-off in prior years. As a percentage of
revenues, SG&A decreased to 8.2% in 2000 from 8.4% in 1999. This
decrease is primarily attributable to increases in revenues in
the Marine, Trading and Milling, and Sugar segments without a
corresponding increase in SG&A costs.
As a percent of revenues, SG&A decreased to 8.4% in 1999 compared
to 9.2% in 1998 primarily as a result of the sale of the Puerto
Rican baking operations in December 1998. This decrease is
partially offset by the consolidation of Tabacal results in 1999,
including the $3.0 million of severance charges discussed above,
and the winery and Zambia milling operations acquired in late
1998.
Interest Income
Interest income totaled $12.6 million, $7.4 million and $7.1
million for the years ended December 31, 2000, 1999 and 1998,
respectively. The increase in 2000 over 1999 reflects an
increase in average funds invested and, to a lesser extent, an
increase in interest rates. Average funds invested increased
primarily as a result of the proceeds from the sale of the
Poultry Division in January 2000. The increase in 1999 reflects
an increase in interest rates partially offset by a decrease in
average funds invested.
Interest Expense
Interest expense totaled $30.1 million, $31.4 million and $26.4
million for the years ended December 31, 2000, 1999 and 1998,
respectively. The decrease in 2000 primarily reflects a decrease
in short-term borrowings. In addition, interest expense for 1999
and 1998 excludes amounts allocated to the discontinued poultry
operations (see Note 13 to the Consolidated Financial
Statements). Short-term borrowings decreased primarily as a
result of the proceeds from the sale of the Poultry Division in
January 2000. The increase in 1999, as compared to 1998,
reflects an increase in both long-term and short-term average
borrowings and an increase in interest rates. The increase in
average borrowings during 1999 is primarily attributable to the
consolidation of the sugar business in December 1998.
Loss from Foreign Affiliates
Loss from foreign affiliates totaled $2.4 million, $1.4 million
and $17.1 million for the years ended December 31, 2000, 1999 and
1998, respectively. The increase in 2000 is primarily the result
of the addition of a new milling operation and lower earnings at
certain existing milling operations in Africa. Based on current
political and economic situations in Africa, management
anticipates losses from foreign milling affiliates to continue in
2001. As discussed above, the Company will report its wine
investment on an equity basis for 2001 and anticipates related
losses will also contribute to increased losses from foreign
affiliates in 2001.
Losses decreased in 1999 compared to 1998 primarily as a result
of excluding the operations of the sugar business. As discussed
in Note 5 to the Consolidated Financial Statements, subsequent to
1998 the sugar business is included in consolidated operations.
Gain (Loss) on Exchange/Disposition of Businesses
On December 29, 2000, the Company exchanged its controlling
interest in a Bulgarian wine operation and cash for a non-
controlling interest in a larger wine operation resulting in a
pre-tax loss of $5.6 million ($3.6 million after tax). On
December 30, 1998, the Company completed the sale of its baking
and flour milling businesses in Puerto Rico resulting in a pre-
tax gain of $54.5 million ($33.3 million after taxes). See Note
2 to the Consolidated Financial Statements for further discussion
of each of these transactions.
Miscellaneous Income
Miscellaneous income totaled $11.1 million, $3.1 million and $3.9
million for the years ended December 31, 2000, 1999 and 1998,
respectively. The increase in 2000 is primarily attributable to
the recognition of unamortized proceeds from prior terminations
of interest rate agreements associated with debt repaid during
the year, gains on the sale of marketable securities held for
sale and increased profitability from a domestic affiliate,
partially offset by the loss on sale of certain produce assets.
Income Tax Expense
The effective tax rates increased significantly during 2000 and
1999 primarily as a result of significant increases in overall
losses from foreign entities for which tax benefits are not
available within their respective countries or to offset domestic
income.
Discontinued Operations
Earnings from discontinued poultry operations (see Note 13 to the
Consolidated Financial Statements), net of income taxes,
decreased in 1999 compared to 1998 due primarily to lower overall
sales prices for poultry products, partially offset by lower
finished feed costs. An increase in poultry production within
the industry had resulted in lower prices for most poultry
products while the Russian economic situation had a negative
effect on domestic prices for dark meat sales.
Other Financial Information
The Company is subject to various federal and state regulations
regarding environmental protection and land and water use. Among
other things, these regulations affect the disposal of livestock
waste and corporate farming matters in general. Management
believes it is in compliance, in all material respects, with all
such regulations. Laws and regulations in the states where the
Company currently conducts its pork operations are becoming more
restrictive. These and future changes could delay the Company's
expansion plans or increase related development costs. Future
changes in environmental or corporate farming laws could affect
the manner in which the Company operates its business and its
cost structure.
The Financial Accounting Standards Board has issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities,"
as amended by SFAS No. 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities an amendment of FASB
Statement No. 133." These statements establish accounting and
reporting standards for derivative instruments and all hedging
activities. They require that an entity recognize all
derivatives as either assets or liabilities at their fair values.
Accounting for changes in the fair value of a derivative depends
on its designation and effectiveness. For derivatives that
qualify as effective hedges, the change in fair value will have
no net impact on earnings until the hedged transaction affects
earnings. For derivatives that are not designated as hedging
instruments, or for the ineffective portion of a hedging
instrument, the change in fair value will affect current period
net earnings. The Company will adopt these statements during the
first quarter of fiscal 2001. The adoption will result in
adjustments primarily to the Company's balance sheet as
derivative instruments and related agreements and deferred
amounts are recorded as assets or liabilities with corresponding
adjustments to Other Comprehensive Income or earnings. The
adoption is not expected to have a material impact on the
Company's earnings or cash flows.
The Company does not believe its businesses have been materially
adversely affected by general inflation.
Derivative Information
The Company is exposed to various types of market risks from its
day-to-day operations. Primary market risk exposures result from
changing interest rates, commodity prices and foreign currency
exchange rates. Changes in interest rates impact the cash
required to service variable rate debt. From time to time, the
Company uses interest rate swaps to manage risks of increasing
interest rates. Changes in commodity prices impact the cost of
necessary raw materials, finished product sales and firm sales
commitments. The Company uses corn, wheat, soybeans and soybean
meal futures and options to manage risks of increasing prices of
raw materials and firm sales commitments. The Company uses hog
futures to manage risks of increasing prices of live hogs
acquired for processing. Changes in foreign currency exchange
rates impact the cash paid or received by the Company on foreign
currency denominated receivables and payables. The Company
manages these risks through the use of foreign currency forward
exchange agreements.
The table below provides information about the Company's non-
trading financial instruments sensitive to changes in interest
rates at December 31, 2000. For debt obligations, the table
presents principal cash flows and related weighted average
interest rates by expected maturity dates. At December 31, 2000,
long-term debt includes foreign subsidiary obligations of $5.0
million denominated in U.S. dollars, $2.5 million denominated in
Congolese francs, and $11.0 million payable in Argentine pesos.
At December 31, 1999, long-term debt includes foreign subsidiary
obligations of $5.1 million denominated in U.S. dollars and $12.8
million payable in Argentine pesos. The Argentine peso is
currently pegged to the U.S. dollar and management believes there
is minimal exchange rate risk. Weighted average variable rates
are based on rates in place at the reporting date. Short-term
instruments including short-term investments, non-trade
receivables and current notes payable have carrying values that
approximate market and are not included in this table due to
their short-term nature.
(Dollars in thousands) 2001 2002 2003 2004 2005 Thereafter Total
Long-term debt:
Fixed rate $ 33,229 26,973 51,379 51,439 51,656 68,704 $283,380
Average interest rate 6.55% 6.98% 7.38% 7.39% 7.40% 8.07% 7.42%
Variable rate $ 1,258 26,667 - - - 35,600 $ 63,525
Average interest rate 5.00% 7.12% - - - 5.64% 6.25%
Non-trading financial instruments sensitive to changes in
interest rates at December 31, 1999 consisted of fixed rate long-
term debt totaling $251.6 million with an average interest rate
of 7.53%, and variable rate long-term debt totaling $77.9 million
with an average interest rate of 6.25%.
Inventories that are sensitive to changes in commodity prices,
including carrying amounts and fair values at December 31, 2000
and 1999 are presented in Note 4 to the Consolidated Financial
Statements. Projected raw material requirements, finished
product sales, and firm sales commitments may also be sensitive
to changes in commodity prices. The tables below provide
information about the Company's derivative contracts that are
sensitive to changes in commodity prices. Although used to
manage overall market risks, certain contracts do not qualify as
hedges for financial reporting purposes. As a result, they are
classified as trading instruments and carried at fair market
value. Contracts that qualify as hedges for financial reporting
purposes are classified as non-trading instruments. Gains and
losses on non-trading instruments are deferred and recognized as
adjustments of the carrying amounts of the commodities when the
hedged transaction occurs. The following tables present the
notional quantity amounts, the weighted average contract prices,
the contract maturities, and the fair value of the position of
the Company's open trading and non-trading derivatives at
December 31, 2000.
Trading:
Contract Volumes Wtd.-avg. Fair
Futures Contracts Quantity Units Price/Unit Maturity Value (000's)
Corn purchases - long 815,000 bushels $ 2.26 2001 $ 48
Corn sales - short 105,000 bushels 2.53 2001 (9)
Soybean meal purchases - long 1,500 tons 194.24 2001 2
Contract Volumes Wtd.-avg.Exercise Fair
Options Contracts Quantity Units Price/Unit Maturity Value (000's)
Wheat puts written - long 885,000 bushels $ 3.10 2001 $ (19)
Wheat calls written - short collars 130,000 bushels 3.80 2001 (1)
Wheat calls purchased - long collars 1,015,000 bushels 3.36 2001 84
Soybean meal puts purchased - short 5,500 tons 190.00 2001 32
Soybean meal calls purchased - long collars 5,500 tons 190.00 2001 29
Soybean meal calls written - short collars 5,500 tons 190.00 2001 (29)
Non-trading:
Contract Volumes Wtd.-avg. Fair
Futures Contracts Quantity Units Price/Unit Maturity Value (000's)
Corn purchases - long 3,615,000 bushels $ 2.22 2001 $ 342
Corn sales - short 3,905,000 bushels 2.24 2001 (285)
Wheat purchases - long 5,050,000 bushels 3.14 2001 (32)
Wheat sales - short 4,850,000 bushels 3.16 2001 173
Soybean meal purchases - long 81,700 tons 183.69 2001 739
Soybean meal sales - short 81,200 tons 185.31 2001 (630)
Soybean purchases - long 1,245,000 bushels 4.87 2001 159
Soybean sales - short 1,245,000 bushels 4.88 2001 (146)
At December 31, 1999, the Company had net trading contracts to
purchase 2.3 million bushels of grain (fair value of $(246,000))
and 11,200 tons of meal (fair value of $24,000), and net
contracts to sell 1.4 million pounds of hogs (fair value of
$16,000). At December 31, 1999, the Company had net non-trading
contracts to sell 1.3 million bushels of grain (fair value of
$(119,000)) and 3,200 tons of meal (fair value of $19,000).
The table below provides information about the Company's trade
receivables and financial instruments sensitive to foreign
currency exchange rates, and all related forward currency
exchange agreements at December 31, 2000. Information is
presented in U.S. dollar equivalents and all contracts mature in
2001. The table presents the notional amounts and weighted
average exchange rate. The notional amount is generally used to
calculate the contractual payments to be exchanged under the
contract.
(Dollars in thousands) Contract Amounts Fair Value
Firmly committed sales contracts
(African rands (ZAR)) $ 35,458 $ (64)
Related derivative:
Forward exchange agreements
(receive $US/pay ZAR) $ 35,819 $ 62
Average contractual exchange rate 7.63
Short-term notes payable:
Variable rate (yen) $ 20,000 $ 20,000
Average effective interest rate 7.60%
Related Derivative:
Forward exchange agreement, including
projected interest due at maturity
(receive yen/pay $US) $ 20,242 $ 20,242
Exchange rate 110.87
At December 31, 1999, the Company had net agreements to exchange
$25,565,000 of contracts denominated in African rands at an
average contractual exchange rate of 6.22 ZAR to one U.S. dollar
and an agreement effectively fixing the exchange rate on the $20
million payable in yen at 104.13 to one U.S. dollar (contract
values approximate market).
Responsibility for Financial Statements
The consolidated financial statements appearing in this annual
report have been prepared by the Company in conformity with
accounting principles generally accepted in the United States of
America and necessarily include amounts based upon judgments with
due consideration given to materiality.
The Company relies on a system of internal accounting controls
that is designed to provide reasonable assurance that assets are
safeguarded, transactions are executed in accordance with Company
policy and are properly recorded, and accounting records are
adequate for preparation of financial statements and other
information. The concept of reasonable assurance is based on
recognition that the cost of a control system should not exceed
the benefits expected to be derived and such evaluations require
estimates and judgments. The design and effectiveness of the
system are monitored by a professional staff of internal
auditors.
The consolidated financial statements have been audited by the
independent accounting firm of KPMG LLP, whose responsibility is
to examine records and transactions and to gain an understanding
of the system of internal accounting controls to the extent
required by auditing standards generally accepted in the United
States of America and render an opinion as to the fair
presentation of the consolidated financial statements.
The Board of Directors pursues its review of auditing, internal
controls and financial statements through its audit committee,
composed entirely of independent directors. In the exercise of
its responsibilities, the audit committee meets periodically with
management, with the internal auditors and with the independent
accountants to review the scope and results of audits. Both the
internal auditors and independent accountants have unrestricted
access to the audit committee with or without the presence of
management.
Independent Auditors' Report
We have audited the accompanying consolidated balance sheets of
Seaboard Corporation and subsidiaries as of December 31, 2000 and
1999, and the related consolidated statements of earnings,
changes in equity and cash flows for each of the years in the
three-year period ended December 31, 2000. These consolidated
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Seaboard Corporation and subsidiaries as of December
31, 2000 and 1999, and the results of their operations and their
cash flows for each of the years in the three-year period ended
December 31, 2000, in conformity with accounting principles
generally accepted in the United States of America.
As discussed in Note 4 to the consolidated financial statements,
the Company changed its method of accounting for certain
inventories from the first-in, first-out method to the last-in,
first-out method in 1999.
/s/KPMG LLP
Kansas City, Missouri
March 5, 2001
SEABOARD CORPORATION
Consolidated Balance Sheets
December 31,
(Thousands of dollars) 2000 1999
Assets
Current assets:
Cash and cash equivalents $ 19,760 $ 11,039
Short-term investments 91,375 91,609
Receivables:
Trade 194,966 141,838
Due from foreign affiliates 36,662 31,383
Other 41,816 27,785
273,444 201,006
Allowance for doubtful receivables (29,801) (29,075)
Net receivables 243,643 171,931
Inventories 218,030 192,847
Deferred income taxes 14,132 15,031
Prepaid expenses and deposits 23,760 20,395
Current assets of discontinued operations - 103,464
Total current assets 610,700 606,316
Investments in and advances to foreign affiliates 63,302 28,449
Net property, plant and equipment 611,361 480,415
Other assets 27,485 30,204
Non-current assets of discontinued operations - 132,407
Total Assets $1,312,848 $1,277,791
See accompanying notes to consolidated financial statements.
SEABOARD CORPORATION
Consolidated Balance Sheets
December 31,
(Thousand of dollars) 2000 1999
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable to banks $ 80,480 $ 221,353
Current maturities of long-term debt 34,487 11,487
Accounts payable 59,181 61,529
Accrued liabilities 74,937 54,408
Deferred revenues 48,004 31,929
Accrued payroll 21,313 17,360
Current liabilities of discontinued operations - 24,013
Total current liabilities 318,402 422,079
Long-term debt, less current maturities 312,418 318,017
Deferred income taxes 107,833 41,948
Other liabilities 33,464 34,924
Non-current liabilities of discontinued operations - 16,824
Total non-current and deferred liabilities 453,715 411,713
Minority interest 46 831
Commitments and contingent liabilities
Stockholders' equity:
Common stock of $1 par value. Authorized
4,000,000 shares; Issued 1,789,599 shares
including 302,079 shares of treasury stock 1,790 1,790
Shares held in treasury (302) (302)
1,488 1,488
Additional capital 13,214 13,214
Accumulated other comprehensive income (106) (201)
Retained earnings 526,089 428,667
Total stockholders' equity 540,685 443,168
Total Liabilities and Stockholders' Equity $1,312,848 $1,277,791
See accompanying notes to consolidated financial statements.
SEABOARD CORPORATION
Consolidated Statements of Earnings
Years ended December 31,
(Thousands of dollars except per share amounts) 2000 1999 1998
Net sales $1,583,696 $1,284,262 $1,294,492
Cost of sales and operating expenses 1,406,439 1,164,134 1,145,379
Gross income 177,257 120,128 149,113
Selling, general and administrative expenses 129,192 107,760 119,343
Operating income 48,065 12,368 29,770
Other income (expense):
Interest income 12,580 7,446 7,072
Interest expense (30,134) (31,418) (26,371)
Loss from foreign affiliates (2,440) (1,413) (17,105)
Gain (loss) on exchange/disposition of businesses(5,612) - 54,544
Minority interest 785 1,283 -
Miscellaneous 11,059 3,128 3,908
Total other income (expense), net (13,762) (20,974) 22,048
Earnings (loss) from continuing operations before
income taxes 34,303 (8,606) 51,818
Income tax expense (25,431) (4,981) (20,391)
Earnings (loss) from continuing operations 8,872 (13,587) 31,427
Earnings from discontinued operations, net
of income taxes of $8,278 and $11,753, for
1999 and 1998 respectively - 13,634 19,511
Gain on disposal of discontinued operations, net of
income taxes of $57,305 90,037 - -
Net earnings $ 98,909 $ 47 $ 50,938
Earnings per common share:
Earnings (loss) from continuing operations $ 5.96 $ (9.13)$ 21.12
Earnings from discontinued operations 60.53 9.16 13.12
Earnings per common share $ 66.49 $ 0.03 $ 34.24
See accompanying notes to consolidated financial statements.
SEABOARD CORPORATION
Consolidated Statements of Changes in Equity
(Thousands of dollars except per share amounts)
Years ended December 31, 2000, 1999 and 1998
Accumulated
Other
Common Treasury Additional Comprehensive Retained Comprehensive
Stock Stock Capital Income Earnings Income
Balances, January 1, 1998 $ 1,790 $ (302) $ 13,214 $ 10 $ 380,656
Net earnings - - - - 50,938 $ 50,938
Other comprehensive income,
net of income tax benefit of $56 - - - (91) - (91)
Comprehensive income - - - - - 50,847
Dividends on common stock
($1.00 per share) - - - - (1,487)
Balances, December 31, 1998 1,790 (302) 13,214 (81) 430,107
Net earnings - - - - 47 47
Other comprehensive income,
net of income tax benefit of $77 - - - (120) - (120)
Comprehensive income - - - - - (73)
Dividends on common stock
($1.00 per share) - - - - (1,487)
Balances, December 31, 1999 1,790 (302) 13,214 (201) 428,667
Net earnings - - - - 98,909 98,909
Other comprehensive income,
net of income tax expense of $61 - - - 95 - 95
Comprehensive income - - - - - $ 99,004
Dividends on common stock
($1.00 per share) - - - - (1,487)
Balances, December 31, 2000 $ 1,790 $ (302) $ 13,214 $ (106) $ 526,089
<FN>
See accompanying notes to consolidated financial statements.
SEABOARD CORPORATION
Consolidated Statement of Cash Flows
Years ended December 31,
(Thousand of dollars) 2000 1999 1998
Cash flows from operating activities:
Net earnings $ 98,909 $ 47 $ 50,938
Adjustments to reconcile net earnings
to cash from operating activities:
Net earnings from discontinued operations - (13,634) (19,511)
Net gain on disposal of discontinued operations (90,037) - -
Depreciation and amortization 50,383 45,582 40,479
Loss from foreign affiliates 2,440 1,413 17,105
Deferred income taxes 57,809 (2,985) 10,884
Gain from recognition of deferred swap proceeds (3,760) - -
Gain from sale of fixed assets (492) (1,984) (2,737)
(Gain) loss from exchange/disposition
of businesses 5,612 - (54,544)
Changes in current assets and liabilities
(net of businesses acquired and disposed):
Receivables, net of allowance (64,182) (18,029) 7,471
Inventories (26,477) (48,127) 35,341
Prepaid expenses and deposits (4,584) (8,127) (1,040)
Current liabilities exclusive of debt (25,279) 3,532 (24,576)
Other, net (879) 1,837 (346)
Net cash from operating activities (537) (40,475) 59,464
Cash flows from investing activities:
Purchase of investments (1,235,054) (443,978) (446,868)
Proceeds from the sale of investments 1,176,653 456,903 311,433
Proceeds from the maturity of investments 58,791 51,073 85,053
Capital expenditures (116,933) (67,713) (26,913)
Investments in and advances to foreign
affiliates, net (23,310) (1,446) (48,586)
Proceeds from the sale of fixed assets 4,589 5,042 9,795
Investment in domestic affiliate - - (2,500)
Additional investment in a controlled subsidiary - (2,791) -
Acquisition of businesses (net of cash acquired) (45,444) - (1,388)
Proceeds from disposal of discontinued
operations, net of cash expenditures 356,107 - -
Proceeds from disposition of businesses - - 72,359
Net cash from investing activities 175,399 (2,910) (47,615)
Cash flows from financing activities:
Notes payable to banks, net (140,873) 62,373 (15,025)
Proceeds from issuance of long-term debt 5,211 26,667 -
Principal payments of long-term debt (24,901) (26,807) (7,400)
Dividends paid (1,487) (1,487) (1,487)
Bond construction fund (4,091) - -
Proceeds from termination of interest
rate swap agreements - 5,982 -
Net cash from financing activities (166,141) 66,728 (23,912)
Net cash flows from discontinued operations - (33,020) 24,227
Net change in cash and cash equivalents 8,721 (9,677) 12,164
Cash and cash equivalents at beginning of year 11,039 20,716 8,552
Cash and cash equivalents at end of year $ 19,760 $ 11,039 $ 20,716
See accompanying notes to consolidated financial statements.
Notes to Consolidated Financial Statements
Note 1
Summary of Significant Accounting Policies
Operations of Seaboard Corporation and its Subsidiaries
Seaboard Corporation and its subsidiaries (the Company) is a
diversified international agribusiness and transportation company
primarily engaged domestically in pork production and processing,
and cargo shipping. Overseas, the Company is primarily engaged
in commodity merchandising, flour and feed milling, sugar
production, and electric power generation. Seaboard Flour
Corporation (the Parent Company) is the owner of 75.3% of the
Company's outstanding common stock.
Principles of Consolidation and Investments in Affiliates
The consolidated financial statements include the accounts of
Seaboard Corporation and its domestic and foreign subsidiaries.
All significant intercompany balances and transactions have been
eliminated in consolidation. The Company's investments in non-
controlled affiliates are accounted for by the equity method.
Financial information from certain foreign subsidiaries and
affiliates is reported on a one- to three-month lag depending on
the specific entity. As more fully described in Note 13, the
Company completed the sale of its Poultry Division effective
January 3, 2000. The Company's financial statements and notes
reflect the Poultry Division as a discontinued operation for all
periods presented.
Short-term Investments
Short-term investments are retained for future use in the
business and include time deposits, commercial paper, tax-exempt
bonds, corporate bonds and U.S. government obligations. All
short-term investments held by the Company are categorized as
available-for-sale and are reported at fair value with unrealized
gains and losses reported, net of tax, as a component of
accumulated other comprehensive income. The cost of debt
securities is adjusted for amortization of premiums and accretion
of discounts to maturity. Such amortization is included in
interest income.
Inventories
The Company uses the lower of last-in, first-out (LIFO) cost or
market for determining inventory cost of live hogs, dressed pork
product and related materials. All other inventories are valued
at the lower of first-in, first-out (FIFO) cost or market.
Property, Plant and Equipment
Property, plant and equipment are carried at cost and are being
depreciated generally on the straight-line method over useful
lives ranging from 3 to 30 years. Property, plant and equipment
leases which are deemed to be installment purchase obligations
have been capitalized and included in the property, plant and
equipment accounts. Routine maintenance, repairs and minor
renewals are charged to operations while major renewals and
improvements are capitalized. Costs expected to be incurred
during regularly scheduled drydocking of vessels are accrued
prior to the drydock date.
Deferred Grant Revenue
Included in other liabilities at December 31, 2000 and 1999 is
$10,280,000 and $10,704,000, respectively, of deferred grant
revenue. Deferred grant revenue represents economic development
funds contributed to the Company by government entities that were
limited to construction of a hog processing facility in Guymon,
Oklahoma. Deferred grants are being amortized to income over the
life of the assets acquired with the funds.
Income Taxes
Deferred income taxes are recognized for the tax consequences of
temporary differences by applying enacted statutory tax rates
applicable to future years to differences between the financial
statement carrying amounts and the tax bases of existing assets
and liabilities.
Comprehensive Income
For the years ended December 31, 2000, 1999 and 1998, other
comprehensive income adjustments were not material and consisted
of unrealized gains on available-for-sale securities and foreign
currency cumulative translation adjustments, net of tax.
Revenue Recognition and Reclassifications
The Company recognizes revenue on commercial exchanges at the
time title to the goods transfers to the buyer. Revenue of the
Company's containerized cargo service is recognized ratably over
the transit time for each voyage.
In accordance with a consensus reached by the Emerging Issues
Task Force on Issue No. 00-10, beginning in the fourth quarter of
2000 the Company's Pork Division reclassified all shipping and
handling billed to customers in sales transactions from a
reduction of revenue to cost of sales. This treatment is
consistent with that followed by Seaboard's other divisions. The
presentation of prior period information has been reclassified to
conform with the current presentation. Shipping and handling
amounts reclassified totalled $32,418,000, $28,958,000 and
$29,126,000 for the years ended December 31, 2000, 1999 and 1998,
respectively.
Use of Estimates
The preparation of the consolidated financial statements in
conformity with accounting principles generally accepted in the
United States of America requires the Company to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities
at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Impairment of Long-lived Assets
Long-lived assets and certain identifiable intangibles are
reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be
recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of the asset to
future net cash flows expected to be generated by the asset. If
such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount
of the assets exceed the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying amount or
fair value less costs to sell. See Note 12 for discussion of
recoverability of certain segments' long-lived assets.
Earnings Per Common Share
Earnings per common share are based upon the average shares
outstanding during the period. Average shares outstanding were
1,487,520 for each of the three years ended December 31, 2000,
1999 and 1998, respectively. Basic and diluted earnings per
share are the same for all periods presented.
Cash and Cash Equivalents
For purposes of the consolidated statements of cash flows, the
Company considers all demand deposits and overnight investments
as cash equivalents. Included in accounts payable are
outstanding checks in excess of cash balances of $22,836,000 and
$23,483,000 at December 31, 2000 and 1999, respectively. The
amounts paid (received) for interest and income taxes are as
follows:
Years ended December 31,
(Thousands of dollars) 2000 1999 1998
Interest (net of amounts capitalized) $ 29,821 33,090 26,444
Income taxes $ 11,805 15,432 (3,608)
Supplemental Noncash Transactions
As more fully described in Note 2, during 2000 the Company sold
its Poultry Division, acquired the assets of an existing hog
production operation, a cargo terminal facility and a flour and
feed milling facility, and exchanged its controlling interest in
a Bulgarian wine operation and cash for a non-controlling
interest in a larger Bulgarian wine operation. As more fully
described in Notes 2 and 5, during 1998 the Company purchased a
wine operation in Bulgaria and a milling operation in Zambia,
consolidated a previously non-controlled foreign affiliate and
disposed of its Puerto Rican baking and flour milling operations.
The following table summarizes the noncash transactions resulting
from the disposition and exchange of businesses in 2000 and 1998:
Years ended December 31,
(Thousands of dollars) 2000 1998
Decrease in net working capital
(including current income tax liability) $ 73,750 $ 4,732
Increase in investments in and advances
to foreign affiliates (25,274) -
Decrease in other fixed assets 7,865 19,736
Decrease in other net assets 102 1,347
Decrease in net assets of discontinued operation 195,034 -
Long-term note receivable from sale - (8,000)
Increase in deferred income tax liability 8,914 -
Gain (loss) on exchange/disposition of businesses (5,612) 54,544
Gain on disposal of discontinued operations,
net of income taxes 90,037 -
Net proceeds from exchange/disposition of businesses $ 344,816 $ 72,359
Net proceeds from exchange/disposition of businesses in 2000
includes $356,107,000 in proceeds from disposal of discontinued
operations and $11,291,000 in cash paid and contributed in the
exchange of a business.
The following table summarizes the noncash transactions resulting
from the acquisitions and consolidation of the foreign affiliate
in 2000 and 1998:
Years ended December 31,
(Thousands of dollars) 2000 1998
Increase in other working capital $ 8,654 $ 38,539
Decrease in investments in and advances to
foreign affiliates - (96,733)
Increase in fixed assets 76,781 114,867
Increase in other net assets 600 9,198
Increase in notes payable and long-term debt (37,091) (58,801)
Increase in other liabilities (3,500) -
Minority interest - (5,682)
Cash paid, net of cash acquired and consolidated $ 45,444 $ 1,388
Foreign Currency
The Company has operations in and transactions with customers in
a number of foreign countries. The currencies of the countries
fluctuate in relation to the U.S. dollar. Most of the Company's
major contracts and transactions, however, are denominated in
U.S. dollars. In addition, the value of the U.S. dollar
fluctuates in relation to the currencies of countries where
certain of the Company's foreign subsidiaries and affiliates
primarily conduct business. These fluctuations result in
exchange gains and losses. The activities of these foreign
subsidiaries and affiliates are primarily conducted with U.S.
subsidiaries or operate in hyper-inflationary environments. As a
result, the Company remeasures the financial statements of
certain foreign subsidiaries and affiliates using the U.S. dollar
as the functional currency. The exchange gains and losses
reported in earnings were not material for the years ended
December 31, 2000, 1999 and 1998. Foreign currency exchange
restrictions imposed upon the Company's foreign subsidiaries and
foreign affiliates do not have a significant effect on the
consolidated financial position of the Company.
Certain foreign subsidiaries use local currency as their
functional currency. Assets and liabilities of these
subsidiaries are translated to U.S. dollars at year-end exchange
rates, and income and expense items are translated at average
rates for the year. Resulting translation gains and losses were
not material for the years ended December 31, 2000, 1999 and
1998. Translation gains and losses are recorded as components of
accumulated other comprehensive income.
The Company, from time-to-time, enters into foreign currency
exchange agreements to manage the foreign currency exchange risk
on certain transactions denominated in foreign currencies. At
December 31, 2000, the Company had net agreements to exchange
$35,819,000 of contracts denominated in foreign currencies.
Gains and losses on foreign currency exchange agreements
designated as hedges and for which there is a high correlation
between changes in the value of the exchange agreement and
changes in the value of the hedged contract are deferred and
ultimately recognized in earnings along with the related
contract.
Financial Instruments
The Company, from time-to-time, enters into interest rate
exchange agreements which involve the exchange of fixed-rate and
variable-rate interest payments over the life of the agreements
without the exchange of the underlying notional amounts to hedge
the effects of fluctuations in interest rates. These agreements
effectively convert specifically identified, variable-rate debt
into fixed-rate debt. Differences to be paid or received are
accrued as interest rates change and are recognized as an
adjustment to interest expense. See Note 8 for a description of
outstanding exchange rate agreements.
Gains and losses on termination of interest rate exchange
agreements are deferred and recognized over the term of the
underlying debt instrument as an adjustment to interest expense.
At December 31, 2000 and 1999, net deferred gains on terminated
interest rate exchange agreements totaled $2,217,000 and
$6,435,000, respectively. In cases where there is no remaining
underlying debt instrument, gains and losses on termination are
recognized currently in miscellaneous income (expense).
Commodity Instruments
The Company enters into forward purchase and sale contracts,
futures and options to manage its exposure to price fluctuations
in the commodity markets. These commodity instruments generally
involve the anticipated purchase of raw materials and firm sales
commitments. At December 31, 2000, the Company had net contracts
to purchase 2.4 million bushels of grain and net contracts to
sell 3,500 tons of meal.
Gains and losses on commodity instruments designated as hedges
and for which there is high correlation between changes in the
value of the instrument and changes in the value of the hedged
commodity are deferred and ultimately recognized in operations as
part of the cost of the commodity. Gains and losses on
qualifying hedges of firm commitments or probable anticipated
transactions are also deferred and recognized as adjustments of
the carrying amounts of the commodities when the hedged
transaction occurs. When a qualifying hedge is terminated or
ceases to meet the specific criteria for use of hedge accounting,
any deferred gains or losses through that date continue to be
deferred. Commodity instruments not qualifying as hedges for
financial reporting purposes are marked to market and included in
cost of sales in the consolidated statements of operations. For
the years ended December 31, 2000, 1999 and 1998, losses on
commodity contracts reported in operating income were $1,315,000,
$592,000, and $3,139,000, respectively. At December 31, 2000,
the net deferred gain on commodity instruments was $236,000,
compared to a net deferred loss at December 31, 1999 of $426,000.
These amounts are included in deferred revenues in the
consolidated balance sheets. Cash flows from commodity
instruments are classified in the same category as cash flows
from the hedged commodities in the consolidated statements of
cash flows.
Transactions with Parent Company
At December 31, 2000, the Company had a net receivable balance
from the Parent Company of $4,910,000 compared to a net payable
balance at December 31, 1999 of $1,382,000. Interest on
receivables is charged at the prime rate and interest on payables
is accrued at the Company's short-term borrowing rate. Related
interest income (expense) for the years ended December 31, 2000,
1999 and 1998, amounted to $192,000, $151,000 and $(8,000)
respectively.
Note 2
Acquisitions and Dispositions of Businesses
The Company completed the sale of its Poultry Division on January
3, 2000. The sale of this division is presented as a
discontinued operation and is more fully described in Note 13.
During the first quarter of 2000, the Company purchased the
assets of an existing hog production operation for approximately
$75 million, consisting of $34 million in cash and the assumption
of $34 million in debt, $4 million of currently payable
liabilities and $3 million payable over the next four years. The
transaction was accounted for using the purchase method and would
not have significantly affected net earnings or earnings per
share on a pro forma basis.
During the second quarter of 2000, the Company purchased the
assets of a cargo terminal facility for approximately $9.1
million consisting of $8.2 million in cash, including transaction
expenses, and the assumption of $0.9 million in debt. The
transaction was accounted for using the purchase method and would
not have significantly affected net earnings or earnings per
share on a pro forma basis.
During the third quarter of 2000, the Company purchased the
assets of a flour and feed milling facility in the Republic of
Congo for approximately $5.9 million, consisting of $3.4 million
in cash and $2.5 million payable over the next ten years. The
transaction was accounted for using the purchase method and would
not have significantly affected net earnings or earnings per
share on a pro forma basis.
During the third quarter of 2000, the Company discontinued the
business of marketing fruits and vegetables grown through joint
ventures or independent growers by selling certain assets of its
Produce Division resulting in a $2.0 million loss.
During the fourth quarter of 2000, the Company exchanged its
controlling interest in a Bulgarian wine company and $10,400,000
cash for a non-controlling interest in a larger Bulgarian wine
operation, realizing a $5,612,000 pre-tax ($3,648,000 after tax)
loss on the exchange. This investment will be accounted for
using the equity method. The transaction would not have
significantly affected net earnings or earnings per share on a
pro forma basis.
In October 1998, the Company purchased a controlling interest in
an existing Bulgarian winery by acquiring newly issued shares for
$15,000,000. During 1999, the Company further increased its
interest in the winery by purchasing previously issued shares for
$2,791,000. In November 1998, the Company purchased a flour and
feed milling operation in Zambia by assuming liabilities of
approximately $10,232,000. These acquisitions were accounted for
using the purchase method and would not have significantly
affected sales, net earnings or earnings per share on a pro forma
basis.
On December 30, 1998, the Company completed the sale of its
Puerto Rican baking and flour milling businesses to a management
group led by the President of the baking businesses. These
assets were sold for $81,359,000 and the assumption of
$11,770,000 in liabilities. The proceeds consisted of
$72,359,000 in cash, an $8,000,000 interest bearing subordinated
note receivable due in 2004 (subsequently collected in the first
quarter of 2001), and a $1,000,000 interest bearing note
receivable (collected in the first quarter of 1999). The Company
recognized a pre-tax gain of $54,544,000 ($33,272,000 after tax)
in connection with this transaction. The following pro forma
unaudited financial data reflects the pro forma impact on the
Company's results of operations as if the sale was consummated at
the beginning of 1998, excluding the gain on the sale, with pro
forma adjustments to give effect to reducing short-term
borrowings, interest income earned on short-term investments and
certain other adjustments, together with related income tax
effects:
(Thousands of dollars, except per share amount) Year ended December 31,1998
Net sales $ 1,203,316
Loss from continuing operations $ (4,146)
Net earnings $ 16,128
Loss per share from continuing operations $ (2.79)
Earnings per share $ 10.84
The pro forma financial information is not necessarily indicative
of the results of operations that would have occurred had the
sale been consummated on the dates assumed, nor are they
necessarily indicative of future operating results.
Note 3
Short-term Investments
Substantially all available-for-sale securities have contractual
maturities within two years and are available to meet current
operating needs. The amortized cost of these investments
approximates fair value at December 31, 2000 and 1999. The
Company realized net gains of $3,567,000 on sales of available-
for-sale securities for the year ended December 31, 2000, which
is included in miscellaneous income. Gross realized gains and
losses on sales of available-for-sale securities were not
material for the years ended December 31, 1999 and 1998. The
following is a summary of the estimated fair value of available-
for-sale securities at December 31, 2000 and 1999:
December 31,
(Thousands of dollars) 2000 1999
U.S. Treasury securities and obligations of
U.S. government agencies $ 20,501 $ 33,960
Obligations of states and political subdivisions 60,610 35,526
Other securities 10,264 22,123
Total securities $ 91,375 $ 91,609
Note 4
Inventories
A summary of inventories at the end of each year is as follows:
December 31,
(Thousands of dollars) 2000 1999
At lower of LIFO cost or market:
Live hogs and related materials $ 117,699 $ 75,662
Dressed pork and related materials 10,995 8,360
128,694 84,022
LIFO allowance (326) 4,026
Total inventories at lower of LIFO cost or market 128,368 88,048
At lower of FIFO cost or market:
Grain, flour and feed 42,534 41,772
Sugar produced and in process 24,454 22,398
Crops in production and related materials 4,978 7,490
Wine and other spirits - 12,555
Other 17,696 20,584
Total inventories at lower of FIFO cost or market 89,662 104,799
Total inventories $ 218,030 $ 192,847
In 1999, the Company changed its method of accounting for certain
inventories of the Pork Division from FIFO to LIFO increasing net
earnings from continuing operations in 1999 by $2,456,000 or
$1.65 per common share. If the FIFO method had been used,
inventories would have been $326,000 higher and $4,026,000 lower
than those reported at December 31, 2000 and 1999, respectively.
Note 5
Investments in and Advances to Foreign Affiliates
The Company has made investments in and advances to non-
controlled foreign affiliates primarily conducting business in
flour and feed milling and wine making. The foreign affiliates
are located in Angola, the Democratic Republic of Congo, Lesotho,
Kenya, Mozambique, Nigeria and Sierra Leone in Africa; Ecuador in
South America; Haiti in the Caribbean; and Bulgaria. These
investments are accounted for by the equity method.
The Company's investments in foreign affiliates are primarily
carried at the Company's equity in the underlying net assets of
each subsidiary. Certain of these foreign affiliates operate
under restrictions imposed by local governments which limit the
Company's ability to have significant influence on their
operations. These restrictions have resulted in a loss in value
of these investments and advances that is other than temporary.
The Company suspended the use of the equity method for these
investments and recognized the impairment in value by a charge to
earnings in years prior to 1998.
During the first quarter of 2000, the Company invested $7,500,000
for a minority interest in a flour and feed mill operation in
Kenya. During the fourth quarter of 2000, the Company acquired a
non-controlling interest in a Bulgarian wine operation. See Note
2 for further discussion.
During the second quarter of 1999, the Company invested
$1,700,000 for a minority interest in a flour mill in Angola. In
July 1998, the Company acquired for $5,000,000 a non-controlling
interest in a flour mill in Lesotho. In June 1998, the Company,
in a joint venture with two other partners, acquired an interest
in a flour mill in Haiti. The Company made an investment of
$3,000,000 for a minority interest in the joint venture, which in
turn owns 70% of a Haitian company which owns the flour mill.
These investments are being accounted for using the equity
method.
Ingenio y Refineria San Martin del Tabacal S.A. (Tabacal) is an
Argentine company primarily engaged in growing and refining
sugarcane and, to a lesser extent, citrus production. The
Company accounted for this investment using the equity method
from July 1996 (date of acquisition) through December 1998.
Losses from foreign affiliates during 1998 are primarily
attributable to the operations of Tabacal. Effective
December 31, 1998, the Company obtained voting control over a
majority of the capital stock of Tabacal. Accordingly, as of
December 31, 1998, Tabacal is accounted for as a consolidated
subsidiary. See Note 1 for the noncash transactions resulting
from this consolidation in 1998.
Sales of grain and supplies to non-consolidated foreign
affiliates are included in consolidated net sales for the years
ended December 31, 2000, 1999 and 1998, and amounted to
$106,876,000, $69,739,000 and $107,424,000, respectively.
Combined condensed financial information of the non-controlled,
non-consolidated foreign affiliates for their fiscal periods
ended within each of the Company's years ended, including the
Bulgarian wine operation's financial position as of December 31,
2000 only, as discussed in Note 2, and Tabacal's operating
results for 1998 only, are as follows:
December 31,
(Thousands of dollars) 2000 1999 1998
Net sales $ 230,460 166,592 217,362
Net loss $ (8,843) (8,966) (20,497)
Total assets $ 257,534 122,008 137,381
Total liabilities $ 152,560 61,557 72,995
Total equity $ 104,974 60,451 64,386
Note 6
Property, Plant and Equipment
A summary of property, plant and equipment at the end of each
year is as follows:
December 31,
(Thousands of dollars) 2000 1999
Land and improvements $ 97,842 $ 81,317
Buildings and improvements 186,408 154,647
Machinery and equipment 479,023 388,887
Transportation equipment 94,691 82,174
Office furniture and fixtures 12,817 13,697
Construction in progress 25,221 14,023
896,002 734,745
Accumulated depreciation and amortization (284,641) (254,330)
Net property, plant and equipment $ 611,361 $ 480,415
Note 7
Income Taxes
Income taxes attributable to continuing operations for the years
ended December 31, 2000, 1999 and 1998 differ from the amounts
computed by applying the statutory U.S. Federal income tax rate
to earnings (loss) from continuing operations before income taxes
for the following reasons:
Years ended December 31,
(Thousands of dollars) 2000 1999 1998
Computed "expected" tax expense (benefit) $ 12,006 $ (3,012) $ 18,136
Adjustments to tax expense (benefit) attributable to:
Foreign tax differences 10,160 8,988 7,680
Tax-exempt investment income (1,718) (358) (730)
State income taxes, net of Federal benefit (2,506) 12 199
Other 7,489 (649) (4,894)
Income tax expense - continuing operations 25,431 4,981 20,391
Income tax expense - discontinued operations 57,305 8,278 11,753
Total income tax expense $ 82,736 $ 13,259 $ 32,144
The components of total income taxes are as follows:
Years ended December 31,
(Thousands of dollars) 2000 1999 1998
Current:
Federal $(35,613)$ 2,976 $(11,570)
Foreign (including Puerto Rico) 4,131 5,332 17,126
State and local (1,334) (419) (118)
Deferred:
Federal 57,204 (3,445) 14,300
Foreign (including Puerto Rico) (8) (6) 110
State and local 1,051 543 543
Income tax expense - continuing operations 25,431 4,981 20,391
Unrealized changes in other comprehensive income 61 (77) (56)
Income tax expense - discontinued operations 57,305 8,278 11,753
Total income taxes $ 82,797 $ 13,182 $ 32,088
Components of the net deferred income tax liability at the end of
each year are as follows:
December 31,
(Thousands of dollars) 2000 1999
Deferred income tax liabilities:
Cash basis farming adjustment $ 16,224 $ 17,162
Deferred earnings of foreign subsidiaries 58,427 1,749
Depreciation 80,296 64,116
LIFO 32,242 1,570
Other 3,056 2,553
190,245 87,150
Deferred income tax assets:
Reserves/accruals 50,056 48,591
Foreign losses 1,791 2,420
Tax credit carryforwards 23,287 10,372
Net operating loss carryforwards 23,118 1,000
Other 442 -
98,694 62,383
Valuation allowance 2,150 2,150
Net deferred income tax liability $ 93,701 $ 26,917
The Company believes its future taxable income will be sufficient
for full realization of the deferred tax assets. The valuation
allowance represents the effect of accumulated losses on certain
foreign subsidiaries that will not be recognized without future
liquidation or sale of these subsidiaries. At December 31, 2000,
the Company had tax credit carryforwards of approximately
$23,287,000. Approximately $11,236,000 of these carryforwards
expire in varying amounts in 2001 through 2020 while the
remaining balance may be carried forward indefinitely. At
December 31, 2000, the Company had federal net operating loss
carryforwards of approximately $63,195,000 expiring in varying
amounts in 2019 and 2020.
At December 31, 2000 and 1999, current income taxes payable
totaled $10,915,000 and $7,155,000, respectively.
At December 31, 2000 and 1999, no provision has been made in the
accounts for Federal income taxes which would be payable if the
undistributed earnings of certain foreign subsidiaries were
distributed to the Company since management has determined that
the earnings are permanently invested in these foreign
operations. Should such accumulated earnings be distributed, the
resulting Federal income taxes would amount to approximately
$18,000,000.
Note 8
Notes Payable and Long-term Debt
Notes payable amounting to $80,480,000 and $221,353,000 at
December 31, 2000 and 1999, respectively, consisted of
obligations due banks within one year. At December 31, 2000,
these funds were outstanding under the Company's one-year
revolving credit facilities totaling $141.0 million and short-
term uncommitted credit lines from banks totaling $119.5 million,
less outstanding letters of credit commitments totaling $4.2
million. Subsequent to year-end, the Company's one-year
revolving credit facilities totaling $141.0 million maturing in
the first quarter of 2001 were extended for an additional year
and short-term uncommitted credit lines totaling $119.5 million
were reduced to $109.5 million. Weighted average interest rates
on the notes payable were 7.64% and 7.24% at December 31, 2000
and 1999, respectively.
Included in notes payable at December 31, 2000 and 1999, are
$20.0 million payable in Japanese yen (yen), outstanding under a
$20.0 million uncommitted line of credit. At December 31, 2000
and 1999, the Company had foreign exchange contracts in place
effectively fixing the exchange rate on this note payable at
110.87 and 104.13 yen to one U.S. dollar, respectively.
Notes payable, the revolving credit facilities and uncommitted
credit lines from banks are unsecured and do not require
compensating balances. Facility fees on these agreements are not
material.
A summary of long-term debt at the end of each year is as
follows:
December 31,
(Thousands of dollars) 2000 1999
Private placements
6.49% senior notes, due 2001 through 2005 $100,000 $100,000
7.88% senior notes, due 2003 through 2007 125,000 125,000
Industrial Development Revenue Bonds (IDRBs), floating rates
(5.23% - 6.23% at December 31, 2000) due 2018 through 2027 35,600 48,700
Promissory note, 6.87%, due 2001 through 2008 31,663 -
Revolving credit facility, floating rates
(7.12% at December 31, 2000) due 2002 26,667 26,667
Foreign subsidiary obligations,
(9.00% - 14.50%) due 2001 through 2007 17,174 15,353
Foreign subsidiary obligation, floating rate
(5.00% at December 31, 2000) due 2001 1,258 2,522
Term loan, 3.00%, due 2001 5,144 5,415
Capital lease obligations and other 4,399 5,847
346,905 329,504
Current maturities of long-term debt (34,487) (11,487)
Long-term debt, less current maturities $312,418 $318,017
Of the 2000 foreign subsidiary obligations, $5,000,000 is
denominated in U.S. dollars, $2,469,000 is denominated in
Congolese francs and the remaining $10,963,000 is payable in
Argentine pesos. Of the 1999 foreign subsidiary obligations,
$5,085,000 was denominated in U.S. dollars and the remaining
$12,790,000 was payable in Argentine pesos.
At December 31, 2000, Argentine land and sugar production
facilities and equipment with a depreciated cost of $17,461,000
secure certain bond issues and foreign subsidiary debt. Included
in other assets at December 31, 2000 and 1999, are $5,622,000 and
$1,532,000, respectively, of unexpended bond proceeds held in
trust that are invested in accordance with the bond issuance
agreements.
The terms of the note agreements pursuant to which the senior
notes, IDRBs, term loan and revolving credit facilities were
issued require, among other terms, the maintenance of certain
ratios and minimum net worth, the most restrictive of which
requires the ratio of consolidated funded debt to consolidated
shareholders' equity, as defined, not to exceed .90 to 1;
requires the maintenance of consolidated tangible net worth, as
defined, of not less than $250,000,000; and limits the Company's
ability to sell assets under certain circumstances. The Company
is in compliance with all restrictive debt covenants relating to
these agreements as of December 31, 2000.
At December 31, 1998, the Company had interest rate exchange
agreements in place effectively fixing the interest rate on $200
million of variable rate debt to a fixed, weighted-average rate
of 6.33%. These contracts were scheduled to expire in 2007.
However, during 1999 the Company terminated these agreements for
proceeds totaling $5,982,000. These proceeds were deferred and
scheduled to be amortized as a reduction of interest expense
through the original expiration dates in 2007, or recognized as
other income to the extent of any early repayment of the related
debt. Upon completion of the Poultry Division sale in January
2000, unamortized proceeds of $582,000 related to agreements
associated with debt of the Company's discontinued poultry
operations (see Note 13) were recognized as a component of the
gain on the disposal in the first quarter of 2000. During 2000,
the Company repaid approximately $165,774,000 in notes payable,
industrial development revenue bonds and other debt primarily
with proceeds from the Poultry Division sale. As a result of
these repayments, approximately $3,760,000 in unamortized
proceeds from prior terminations of interest rate agreements
related to these notes were recognized as miscellaneous income.
Ownership of these agreements, including any amortization of
termination proceeds, decreased interest expense in 2000 by
$561,000 and increased interest expense in 1999 and 1998 by
$799,000 and $808,000, respectively.
Annual maturities of long-term debt at December 31, 2000 are as
follows: $34,487,000 in 2001, $53,640,000 in 2002, $51,379,000 in
2003, $51,439,000 in 2004, $51,656,000 in 2005 and $104,304,000
thereafter.
Note 9
Fair Value of Financial Instruments
The fair value of the Company's short-term investments is based
on quoted market prices at the reporting date for these or
similar investments. At December 31, 2000 and 1999, the fair
value of the Company's short-term investments was $91,375,000 and
$91,609,000, respectively, with an amortized cost of $91,294,000
and $91,684,000 at December 31, 2000 and 1999, respectively.
The fair value of long-term debt is determined by comparing
interest rates for debt with similar terms and maturities. At
December 31, 2000 and 1999, the fair value of the Company's long-
term debt was $355,601,000 and $325,275,000, respectively, with a
carrying value of $346,905,000 and $329,504,000 at December 31,
2000 and 1999, respectively.
Other financial instruments consisting of cash and cash
equivalents, net receivables, notes payable, and accounts payable
are carried at cost, which approximates fair value, as a result
of the short-term nature of the instruments.
Note 10
Employee Benefits
The Company maintains a defined benefit pension plan for its
domestic salaried and clerical employees. The Company also
sponsors non-qualified, unfunded supplemental executive plans.
The plans generally provide for normal retirement at age 65 and
eligibility for participation after one year's service upon
attaining the age of 21. The Company bases pension contributions
on funding standards established by the Employee Retirement
Income Security Act of 1974. Benefits are generally based upon
the number of years of service and a percentage of final average
pay. Plan assets are invested in equity securities, fixed income
bonds and short-term cash equivalents. The changes in the plans'
benefit obligations and fair value of assets for the years ended
December 31, 2000 and 1999, and a statement of the funded status
as of December 31, 2000 and 1999 are as follows:
December 31,
(Thousands of dollars) 2000 1999
Reconciliation of benefit obligation:
Benefit obligation at beginning of year $ 31,764 $ 30,072
Service cost 1,802 2,419
Interest cost 2,498 2,231
Actuarial losses (gains) 2,445 (1,685)
Benefits paid (1,502) (1,273)
Curtailments (1,190) -
Benefit obligation at end of year 35,817 31,764
Reconciliation of fair value of plan assets:
Fair value of plan assets at beginning of year 27,722 26,213
Actual return on plan assets (177) 2,734
Employer contributions 1,346 48
Benefits paid (1,502) (1,273)
Fair value of plan assets at end of year 27,389 27,722
Funded status (8,428) (4,042)
Unrecognized transition obligation 619 1,052
Unamortized prior service cost (1,077) (1,966)
Unrecognized net actuarial gains (171) (5,315)
Accrued benefit cost $ (9,057) $(10,271)
Assumptions used in determining pension information were:
Years ended December 31,
2000 1999 1998
Weighted-average assumptions
Discount rate 7.75% 8.00% 7.25%
Expected return on plan assets 8.75% 8.75% 8.75%
Long-term rate of increase in
compensation levels 4.50% 4.50% 4.50%
The net periodic benefit cost of these plans was as follows:
Years ended December 31,
(Thousands of dollars) 2000 1999 1998
Components of net periodic benefit cost:
Service cost $ 1,802 $ 2,419 $ 2,640
Interest cost 2,498 2,231 2,558
Expected return on plan assets (2,417) (2,268) (2,692)
Amortization and other (136) (65) (68)
Net periodic benefit cost $ 1,747 $ 2,317 $ 2,438
As of December 31, 2000, the projected benefit obligation and
accumulated benefit obligation for unfunded pension plans were
$4,793,000 and $3,821,000, respectively. As of December 31,
1999, the projected benefit obligation and accumulated benefit
obligation for unfunded pension plans were $3,583,000 and
$2,685,000, respectively. As more fully described in Note 13,
the Poultry Division was sold in January 2000 and is presented as
a discontinued operation. Poultry employees retain benefits in
the primary pension plan summarized above and were treated as
terminated and fully vested at the date of the sale. This
resulted in a $1,614,000 curtailment gain in 2000, excluded from
the table above and included as a component of the total gain on
disposal of discontinued operations.
The Company has certain individual, non-qualified, unfunded
supplemental retirement agreements for certain executive
employees. Pension expense for these plans was $933,000,
$658,000 and $514,000 for the years ended December 31, 2000, 1999
and 1998, respectively. Included in other liabilities at
December 31, 2000 and 1999 is $9,663,000 and $8,492,000,
respectively, representing the accrued benefit obligation for
these plans.
The Company maintains a defined contribution plan covering most
of its domestic salaried and clerical employees. The Company
contributes to the plan an amount equal to 100% of employee
contributions up to a maximum of 3% of employee compensation.
Employee vesting is based upon years of service with 20% vested
after one year of service and an additional 20% vesting with each
additional complete year of service. Contribution expense was
$1,241,000, $1,157,000 and $1,102,000 for the years ended
December 31, 2000, 1999 and 1998, respectively.
Note 11
Commitments and Contingencies
The Company leases various ships, facilities and equipment under
noncancelable operating lease agreements.
In addition, the Company is a party to master lease programs with
limited partnerships which own certain of the facilities used by
the Company in connection with its hog production. These
arrangements are accounted for as operating leases. Under these
arrangements, the Company has certain rights to acquire any or
all of the leased properties at the conclusion of their
respective lease terms at a price based on estimated fair market
value of the property. In the event the Company does not acquire
any property which it has ceased to lease, the Company has a
limited obligation to the lessors for any deficiency between the
amortized cost of the property and the price for which it is sold
up to a specific amount.
Rental expense for operating leases amounted to $62,038,000,
$58,253,000 and $57,515,000 in 2000, 1999 and 1998, respectively.
Minimum lease commitments under noncancelable leases with initial
terms greater than one year at December 31, 2000 were $25,835,000
in 2001, $21,119,000 in 2002, $12,580,000 in 2003, $6,396,000 in
2004, $5,507,000 in 2005 and $13,090,000 thereafter. It is
expected that, in the ordinary course of business, leases will be
renewed or replaced.
In August 2000, the Company announced that its management had
discovered that assets of its Produce Division had been
overstated in prior periods due to accounting errors and
irregularities in the Produce Division's books and records. As a
result, management restated the Company's financial statements
for each of the prior periods effected and filed a Form 10-K/A on
August 28, 2000. In a letter dated December 27, 2000, the
Securities and Exchange Commission (SEC) notified the Company
that it is conducting a formal investigation of this matter to
determine whether there have been any violations of the federal
securities laws and issued a subpoena to acquire certain
documents from the Company. Management is cooperating with the
SEC's requests and believes the outcome of the investigation will
not have any material impact on the Company.
The Company owns certain partially completed hog production
facilities, having a net carrying value of $12,326,000 at
December 31, 2000. The Company continues to seek, but has not
yet received, necessary operating and related permits. If the
Company is unable to obtain such permits, the carrying value of
such property could be impaired.
The Company is a defendant in a pending arbitration proceeding
and related litigation in Puerto Rico brought by the owner of a
chartered barge and tug which were damaged by fire after delivery
of the cargo. Damages of $47.6 million are alleged. The Company
received a ruling in the arbitration proceeding in its favor
which dismisses the principal theory of recovery although the
ruling has been appealed. The Company believes that the ruling
will be upheld on appeal and it will have no responsibility for
the loss.
During the first quarter of 2000, the Company resolved to the
mutual satisfaction of all parties litigation brought in federal
court by a third-party hog supplier claiming breach of agreement,
common law fraud and violation of the federal RICO statute and
the Company's counterclaims in this litigation. The resolution
did not have a material effect on the Company's financial
position, results of operations or cash flows.
The Company is subject to various other legal proceedings related
to the normal conduct of its business. In the opinion of
management, none of these actions is expected to result in a
judgment having a materially adverse effect on the consolidated
financial statements of the Company.
Note 12
Segment Information
Seaboard Corporation had six reportable segments through December
31, 2000: Pork, Marine, Commodity Trading and Milling, Sugar and
Citrus, Power, and Wine, each offering a specific product or
service. The Pork segment sells fresh and value-added pork
products mainly to further processors and foodservice companies
both domestically and overseas. The Marine segment, primarily
based out of the Port of Miami, offers containerized cargo
shipping services throughout Latin America and the Caribbean.
The Commodity Trading and Milling segment sources bulk and bag
commodities primarily overseas and operates foreign flour and
feed mills. The Sugar and Citrus segment produces and processes
sugar and citrus in Argentina primarily to be marketed locally.
The Power segment generates electric power from two floating
generating facilities located in the Dominican Republic. The
Wine segment, located in Bulgaria, primarily produced wines to be
marketed throughout Europe. As discussed in Note 2, in December
2000 the Company exchanged its controlling interest in its Wine
segment and a cash investment for a non-controlling interest in a
larger wine operation to be accounted for using the equity
method. As a result, the Company's segment disclosures reflect
operating results for the Wine segment through 2000 but no assets
for the Wine segment at December 31, 2000. Revenues from all
other segments are primarily derived from operations including
produce farming (certain portions discontinued in 2000, see Note
2) and baking (sold in December 1998, see Note 2). Each of the
six main segments is separately managed and each was started or
acquired independent of the other segments.
The Company accounted for its investment in Tabacal using the
equity method through December 1998. Effective December 31,
1998, the Company obtained voting control over a majority of the
capital stock of Tabacal. Accordingly, during 1999 the operating
results of Tabacal are accounted for as a consolidated
subsidiary. No comparative 1998 segment operating results
information is provided as Tabacal's results were reported under
the equity method in 1998.
The entire Argentine sugar industry is experiencing financial
difficulties, with Tabacal and certain large competitors
incurring operating losses in part because Argentine sugar prices
are below historical levels. As a result of these recent
operating losses for Tabacal, the Company has evaluated the
recoverability of Tabacal's long-lived assets and believes the
value of those assets is presently recoverable. However, a
further decline in sugar prices over an extended period of time
could result in the carrying values not being recoverable, which
would result in a material charge to earnings for the impairment
of these assets.
Within the Commodity Trading and Milling Division, the Company
has evaluated the recoverability of the long-lived assets of its
Zambian milling operations due to its recent operating losses.
Total long-lived assets at December 31, 2000 are $6,804,000
million. Currently, the Company believes the value of those
assets is recoverable. However, continued operating losses from
this business could result in the carrying values not being
recoverable, which could result in a material charge to earnings
for the impairment of these assets.
The following tables set forth specific financial information
about each segment as reviewed by the Company's management.
Operating income for segment reporting is prepared on the same
basis as that used for consolidated operating income. Operating
income is used as the measure of evaluating segment performance
because management does not consider interest and income tax
expense on a segment basis.
Sales to External Customers:
Years ended December 31,
(Thousands of dollars) 2000 1999 1998
Pork $ 724,708 $ 600,117 $ 529,483
Marine 364,915 307,663 310,903
Commodity Trading and Milling 358,999 259,489 306,406
Sugar and Citrus 60,061 46,855 -
Power 35,846 22,975 26,183
Wine 6,825 12,859 -
All other 32,342 34,304 121,517
Segment/Consolidated Totals $ 1,583,696 $ 1,284,262 $ 1,294,492
Operating Income:
Years ended December 31,
(Thousands of dollars) 2000 1999 1998
Pork $ 63,350 $ 37,661 $ (1,122)
Marine 14,450 (1,893) 17,379
Commodity Trading and Milling (3,518) 2,615 10,505
Sugar and Citrus (7,587) (15,909) -
Power 6,007 7,942 8,839
Wine (9,171) (5,946) -
All other (11,539) (4,673) (395)
Segment Totals 51,992 19,797 35,206
Corporate Items (3,927) (7,429) (5,436)
Consolidated Totals $ 48,065 $ 12,368 $ 29,770
Depreciation and Amortization:
Years ended December 31,
(Thousands of dollars) 2000 1999 1998
Pork $ 21,378 $ 20,759 $ 20,676
Marine 12,181 9,651 8,451
Commodity Trading and Milling 3,266 3,230 2,985
Sugar and Citrus 7,557 7,102 -
Power 2,310 1,547 1,638
Wine 934 362 -
All other 1,917 2,160 6,125
Segment Totals 49,543 44,811 39,875
Corporate Items 840 771 604
Consolidated Totals $ 50,383 $ 45,582 $ 40,479
Capital Expenditures:
Years ended December 31,
(Thousands of dollars) 2000 1999 1998
Pork $ 26,356 $ 22,072 $ 16,304
Marine 17,097 20,001 5,151
Commodity Trading and Milling 1,895 4,816 1,162
Sugar and Citrus 14,380 14,998 -
Power 52,098 389 79
Wine 2,703 3,746 -
All other 2,068 715 3,200
Segment Totals 116,597 66,737 25,896
Corporate Items 336 976 1,017
Consolidated Totals $ 116,933 $ 67,713 $ 26,913
Total Assets:
Years ended December 31,
(Thousands of dollars) 2000 1999
Pork $ 510,836 $ 401,316
Marine 121,895 97,561
Commodity Trading and Milling 197,751 161,477
Sugar and Citrus 186,099 167,972
Power 88,514 21,068
Wine - 29,156
All other 27,665 38,931
Segment Totals 1,132,760 917,481
Corporate Items 180,088 124,439
Discontinued Poultry Operations - 235,871
Consolidated Totals $1,312,848 $1,277,791
Administrative services provided by the corporate office are
primarily allocated to the individual segments based on the size
and nature of their operations. Prior to the third quarter of
1999, these costs were primarily allocated based on revenues.
This change is deemed to provide a more accurate allocation and
does not have a material impact on prior period comparative
information. Corporate assets include short-term investments,
investments in and advances to foreign affiliates, fixed assets,
deferred tax amounts and other miscellaneous items. Corporate
operating losses represent certain operating costs not
specifically allocated to individual segments and general
Corporate overhead previously allocated to the discontinued
Poultry operations.
Geographic Information
No individual foreign country accounts for 10% or more of sales
to external customers. The following table provides a geographic
summary of the Company's net sales based on the location of
product delivery:
Years ended December 31,
(Thousands of dollars) 2000 1999 1998
United States $ 725,327 $ 658,740 $ 670,879
Caribbean, Central and South America 434,353 355,376 336,882
Africa 260,706 102,022 126,190
Pacific Basin and Far East 104,919 92,235 79,063
Canada/Mexico 31,643 41,521 38,598
Eastern Mediterranean 18,013 13,124 39,436
Europe 8,735 21,244 3,444
Totals $1,583,696 $1,284,262 $1,294,492
The following table provides a geographic summary of the
Company's long-lived assets according to their physical location
and primary port for Company owned vessels:
December 31,
(Thousands of dollars) 2000 1999
United States $ 410,773 $ 331,765
Argentina 115,167 111,486
All other 85,421 37,164
Totals $ 611,361 $ 480,415
At December 31, 2000 and 1999, the Company had approximately
$153,831,000 and $93,624,000, respectively, of foreign
receivables, excluding receivables due from foreign affiliates,
which represent more of a collection risk than the Company's
domestic receivables. The Company believes its allowance for
doubtful receivables is adequate.
Note 13
Discontinued Operations
On January 3, 2000, the Company completed the sale of its Poultry
Division to ConAgra, Inc. for $375 million, consisting of the
assumption of approximately $16 million in indebtedness and the
remainder in cash, resulting in a pre-tax gain on the sale of
approximately $147.3 million ($90.0 million after estimated
taxes), including a final adjustment recorded in the fourth
quarter of 2000.
The Company's financial statements reflect the Poultry Division
as a discontinued operation for all periods presented. Operating
results of the discontinued poultry operations are summarized
below. The amounts exclude general corporate overhead previously
allocated to the Poultry Division for segment reporting purposes.
The amounts include interest on debt at the Poultry Division
assumed by the buyer and an allocation of the interest on the
Company's general credit facilities based on a ratio of the net
assets of the discontinued operations to the total net assets of
the Company plus existing debt under the Company's general credit
facilities. The results for 1999 reflect activity through
November 1999 (the measurement date); results for 1998 reflect
activity for the entire year. Net losses incurred after the
measurement date (for the month of December 1999) totaled
$4,180,000 and were deferred as a component of current assets of
discontinued operations at December 31, 1999. These losses were
recognized in 2000 as a reduction of the gain realized on the
sale.
Years ended December 31,
(Thousands of dollars) 1999 1998
Net sales $ 437,695 $ 514,503
Operating income $ 27,023 $ 36,414
Earnings from discontinued operations $ 13,634 $ 19,511
Assets and liabilities of the discontinued poultry operations are
summarized below:
(Thousands of dollars) December 31, 1999
Receivables $ 27,367
Inventories 70,532
Prepaid expenses and deposits 1,385
Deferred net loss after measurement date 4,180
Current assets of discontinued operations $ 103,464
Net property, plant and equipment $ 132,224
Other assets 183
Non-current assets of discontinued operations $ 132,407
Accounts payable $ 14,189
Accrued liabilities 9,824
Current liabilities of discontinued operations $ 24,013
Long-term debt $ 16,145
Other liabilities 679
Non-current liabilities of discontinued operations $ 16,824